Economic Integration Essay

INTRODUCTION Regional trade agreements and global trade liberalization are common terms that are used to analyze different market structures in the market. According to international economics, RTAs (Regional Trading Agreements) are the agreements in which members give each another privileged treatment with respect to the extent by which the trade barrier have been established. On the other side, global trade liberalization, is a general term referring to the depletion of trade boundaries globally to ensure free trade among all states. Free trade agreements are more formal than the global trade liberalization policies. It is deemed that Regional Trade Agreements are yielded from the global trade liberalization.

What do these gains consist in? 1.1 Internal economies of scale as a source of market failure The neo-classical theories of trade, i.e. the Heckscher-Ohlin model, rest on the assumption that perfect competition rules the firms decisions. However, in the reality we can observe that the markets on which internal economies of scale occur present ... ... middle of paper ... ...ductive firms rather than an improvement of competition. Still, since the company have to face abroad competition, these two visions can be compatible.

Meanwhile, for both the import and exporter, free trade agreements can help simplify customs formalities. When there is an unfair agreement between protocol partners, FTA can help the trader to deal with the remedy. Also, only the goods originated by FTA members are qualified for the benefits. Firstly, FTA expedites the development of world trade by decreasing the cost of trade and circulation, promoting the liberalization and facilitation and giving impetus to new FTA. Secondly, FTA accelerates international investment as well as optimize the industrial structure and the effect of the allocation of

Another way of reducing conflict is by creating trade relationships and interdependencies, and lastly economic integration has the ability to change politics; it does so through the interactions of trade markets and relationships built through globalization. Economic globalization and economic integration can in most cases keep dispute behaviours from occurring by using state-state relationships in the sphere of the market. The market becomes an alternate domain in which many disputes can be settled by competition or dependence and can prevent state-state conflict and violence. Economic globalization can reduce disputes between states because it is an alternative to military violence and can result in market competition. An example of how this could be achieved is by having two (or more) states focusing their resources and energies toward the goal of becoming the economic hegemon of the market.

Trade liberalisation is the reduction or elimination of trade barriers within countries in a bid to enhance and encourage exchange of goods (Rivoli, 2014). The trade liberalisation involves the removal or reduction of barriers or tariff such as surcharges and duties, and non-tariff obstacles such as licensing requirements and quotas (Rivoli, 2014). In economics, trade liberalisation is meant to promote economic development, growth, and prosperity. Trade liberalisation is one of the major goals of World Trade Organisation (WTO) (Rivoli, 2014). This paper will critically look into contemporary political problems that affect the World Trade Organisation (WTO) in achieving its goal of trade liberalisation.

Recent trade negotiations proposed that countries convert quotas into tariffs (148-149). There is also a global quota which permits x number of goods to be imported but doesn’t restrict who or where the import comes from and a selective quota which is specific in number and country (149). Voluntary export quotas usually affect the economy much like an import quota of equal nature. The difference is they are voluntary and limit the number of exports to be sold by the exporting nation. The purpose of this quota is different from others as purpose is to moderate the international competition and allow less effective domestic producers to sell their goods that would otherwise not be sold due to cheaper and better similar products available through import.

Regional Trade Agreements vs. Global Trade Liberalization There is much debate concerning regional trade agreements and global trade liberalization. Pros and cons can be found for each trade policy. After looking at several arguments for and against regional trade agreements, it seems that overall regional trade agreements are more beneficial when compared to global trade liberalization. A regional trade agreement is “where member nations agree to impose lower barriers to trade within the group than trade with nonmember nations,” (Carbaugh, p 529).

A government can also use trade policy to attract profits, employment, and firms within its borders. This variety of motives then raises the question of whether there exists a purpose for trade agreements distinct from that found in the perfectly competitive benchmark. My proposed dissertation restores the previous consensus behind the terms-of-trade motive for trade agreements. I consider trade agreements in a quite general setting that imposes limited assumptions on consumer preferences, government preferences, and market structure. Despite the various motives for trade policy, I establish that trade agreements are always efficient if they force governments to act is if they do not value rents from terms-of-trade improvements.

Free trade has many advantages including first, lower prices for consumers by removing tariffs enabling us to buy cheaper imports. Second, free trade encourages greater competition. There are more incentives to cut costs as for example, a monopoly in the U.S. may face competition from foreign companies. Third, the law of comparative advantage says that free trade will enable an increase in economic welfare. This allows countries to specialize in producing goods and have a lower opportunity cost.

Free trade is the trade between nations without protective customs tariffs. Protectionism can be definite as the establishment of barriers to the importation of goods and services from foreign countries in order to protect domestic producers. We can wonder if forming a trade bloc is a step toward free trade or a step toward protectionism and what are the advantages and disadvantages of forming a regional trade bloc like the EU. I – Forming a trade bloc 1 – Forming a trade bloc : a step toward free trade On the one hand, forming a trade bloc may seem to answer the... ... middle of paper ... ...mmunity trade. As a consequence cheaper imports from non partners country may be replaced by expensive imports from a better country.